Netflix Is Testing a Lower-Cost Streaming Plan

Sterne Agee analyts Arvind Bhatia and Brett Strauser analyze Netflix, Inc. (NASDAQ:NFLX)’s new subscription plan. Netflix is testing a $6.99 plan for new subscribers. The plan could attract the more value-conscious consumers but could also somewhat cannibalize existing subscribers.

Netflix is testing a $6.99/month streaming plan

Netflix, Inc. (NASDAQ:NFLX) is testing a $6.99/month streaming plan. The plan is available to NEW subscribers only. This is lower than the current $7.99/month plan. However, the $6.99 plan allows streaming to only one screen at a time versus two screens at a time allowed under the $7.99 plan.

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The new plan likely has at least two goals:

1. Attract the more value conscious consumer.
2. To more effectively compete with Amazon Prime ($80 a year, which works out to $6.67 per month). (Amazon.com, Inc. (NASDAQ:AMZN)- $393.37 – Not Rated).

While the lower price could attract new subscribers, it could also somewhat cannibalize current subscribers given how easy it is to cancel and re-signup for the service.

Also, one has to wonder what impact this would have on Netflix, Inc. (NASDAQ:NFLX)’ ability to raise prices in the future, which is an important part of the long-term bull thesis on the stock and is needed to offset rising content costs.